All eyes on Los Angeles with tariff impact looming

Chart of the Week: Outbound Loaded Rail Container Volume International and domestic – Los Angeles, Outbound Tender Volume Index – Los Angeles, Ontario SONAR: ORAILINTL.LAX, ORAILDOML.LAX, OTVI.LAX, OTVI.ONT

Intermodal demand out of the Los Angeles market continues to show strong annual growth, gaining share from the struggling truckload sector. As the primary U.S. gateway for goods arriving from Asia, Los Angeles is expected to be the first region where the effects of new tariffs will become evident. While there have been no structural changes in domestic freight patterns originating from this region so far, that is expected to shift in the coming weeks. So, what should we be watching for, and what can we learn from the current data?

The ports of Los Angeles and Long Beach, California, handle the largest share of container imports in the U.S., processing approximately 32% of the total volume. The port complexes of New York and New Jersey rank second, with about 15%.

As a result, the Los Angeles area has become one of the largest warehousing hubs in the country and, consequently, the largest outbound transportation market. By analyzing both intermodal container volumes on the rail and truckload demand, we gain insight into how tariffs may affect broader transportation trends and consumer demand across the U.S.

Goods typically arrive at these ports in international-size containers (ORAILINTL), which are generally 20- or 40-foot long. These containers can be transloaded directly onto railcars at the port, offering an efficient inland shipping option. However, maritime shipping companies and freight forwarders — who own or lease these containers — don’t always permit them to move inland. Instead, they are often transloaded into domestic containers (ORAILDOML) or palletized for truck transport.

Many of these goods are also placed in warehouses for future fulfillment. This “pull-forward” behavior has been on the rise over the past year as companies face increasing challenges in sourcing goods from outside the U.S.

Tariffs on Chinese goods are a major concern for both companies and consumers heading into May. Upstream booking data suggests that a significant drop in container volumes from China to the U.S. is imminent, though the exact impact downstream remains uncertain.

According to SONAR’s Ocean Booking Volume Index (via the Container Atlas application), bookings for twenty-foot container equivalents have declined roughly 45% in recent weeks. This index is based on booking dates, typically eight to 15 days before the containers depart their origin port — giving us at least a month of lead time before those shipments arrive at Southern California ports.

Given this, we can expect demand for goods from China to decline in the coming weeks.

However, the situation isn’t so straightforward. Many companies have ramped up orders from alternative suppliers in countries like Vietnam and Thailand. While these nations lack the capacity to fully replace China, they can help mitigate the impact.

It’s still complicated

Supply chains have grown more resilient since the COVID-19 pandemic. Many shippers now employ mitigation strategies to reduce exposure to supply shocks like those caused by aggressive tariffs. Larger companies, in particular, have stockpiled inventory in their warehouses for months, ordering well in advance of fulfillment needs.

So, even if imports from China are severely disrupted, many major retailers still have more than a month’s worth of inventory on hand — possibly enough to bridge the gap until a resolution is reached.

But this brings with it a new risk: a potential “whipsaw” effect. If a trade deal is struck, a sudden surge in orders could overwhelm transportation infrastructure. The longer the current trade uncertainty persists, the greater the chance — and impact — of such a rebound spike.  

What next?

Intermodal volumes, which have benefited from longer order lead times and aggressive pull-forward activity, will be the first to feel the effects as tariff enforcement renders those strategies less effective.

In the short term, truckload freight may see a temporary boost due to urgency created by contracting inventories, gaining share back from the rails. However, this uptick will be short-lived unless conditions change and restocking resumes.

This level of uncertainty is difficult for any company to navigate. Transportation providers must be prepared to respond quickly if freight demand returns, despite having no reliable way to forecast in the current environment. Maintaining staffing and infrastructure will be essential to capitalize on a volatile market — but after three years of challenging conditions, how long can they hold on?

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

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